Justin Perry's Mortgage Blog

Federal Housing Administration (FHA) Insured Loan

• Foreclosure - 3 years
• Deed-in Lieu - 3 years
• Short Sale - 3 years
• Bankruptcy (Chapter 7) - 2 years from bankruptcy discharge
• Bankruptcy (Chapter 13) - 2 years from bankruptcy discharge for automatic approval

Veterans Administration (VA) Guaranteed Loan

• Foreclosure - 2 years.
• Deed-in Lieu - 2 years.
• Short Sale - 2 years.
• Bankruptcy (Chapter 7 or 11) - 2 years from bankruptcy discharge
• Bankruptcy (Chapter 13) - 2 years from bankruptcy discharge for automatic approval

Conventional Conforming Mortgage Loan (meets Fannie Mae (FNMA) and Freddie Mac (FHLMC) Loan Purchasing Guidelines)

• Foreclosure - 7 years for full eligibility with Fannie Mae and Freddie Mac.
• Deed-in Lieu - 7 years for full eligibility with Fannie Mae and 4 years for Freddie Mac. Partial eligibility with Fannie Mae is available after 4 years for up to 90% LTV and 2 years for up to 80% LTV.
• Short Sale - 7 years for full eligibility with Fannie Mae and 4 years for Freddie Mac. Partial eligibility with Fannie Mae is available after 4 years for up to 90% LTV and 2 years for up to 80% LTV
• Bankruptcy (Chapter 7 or 11) - 4 years from bankruptcy discharge or dismissal with Fannie Mae and Freddie Mac
• Bankruptcy (Chapter 13) - 2 years from bankruptcy discharge (4 years from bankruptcy dismissal) for automatic approval with Fannie Mae or Freddie Mac.

Conventional Non-Conforming (JUMBO loans which exceed the maximum loan amount which will be purchased by Fannie Mae or Freddie Mac)

• Foreclosure - 7 years.
• Deed-in-Lieu - 7 years.
• Short Sale - 7 years.
• Bankruptcy - 7 years.

So you want to refinance your mortgage home loan to get a lower interest rate but you want to make sure you are getting the best deal. You might have heard a friend or co-worker mention that they were able to refinance with no closing costs. To some, the initial reaction is that it seems too good to be true. Most of us learned at a young age that nothing in life is “free.” So how of all things can you get a mortgage without paying any closing costs?

It’s actually very simple. There are closing costs (i.e. an appraiser still needs to get paid, the attorney still needs to get paid, etc). On no closing cost loans, the bank or lender pays your closing costs for you. In return the borrower accepts a slightly higher interest rate (typically an 1/8 to a ¼ point higher). That higher rate is what allows the lender or bank to pay the closing costs. For example let’s say closing costs total $2,000. If you wanted to get the absolute best no points rate and were willing to pay closing costs you might get say 3.75% (APR 3.792%). But at 3.875% the lender or bank might make an additional $2,000 on your loan which they give back to you in the form of paying all your closing costs.

One common argument is that “why would I want to pay a higher interest rate for 30 years just so I can save a few $$ today?” Well a counter to that would be that the average American keeps their mortgage for about 3-4 years. So it’s very unlikely that someone will actually have their mortgage for the full 30 year term. Ask yourself how long you have had your current mortgage loan.

Another reason no closing cost refinances are so popular is because we don’t know where rates will be tomorrow. I’ll give you a good example of this. One client of mine refinanced last year and was dead set on wanting to pay closing costs and getting the lowest mortgage rate possible. Since this client knew exactly what he wanted and fully understood the trade-offs of paying or not paying closing costs, we did his mortgage loan as such. That client paid about $2,300 in closing costs on his 15 year fixed rate mortgage. Well two months after he closed mortgage rates went down by half a point. We were able to refinance his mortgage and lower his interest rate by half a point with no closing costs. But he was extremely frustrated that he had just paid $2,300 in closing costs just two months earlier.

Everyone’s situation is different. Just make sure you understand the pros and cons of paying or not paying closing costs when you refinance your mortgage. If you have any questions about this or any other mortgage related topics please call or email me anytime.

 The taste of my morning coffee was ruined today when I started the day like most other days...by reading some headlines.   CNNMoney ran a front page article about 1 of every 4 mortgage loan applications being declined.   With mortgage rates still being near all time lows and the Spring real estate purchase market heating up this is not something would-be buyers want to read.   But are their numbers a bit overblown? 

    My personal observation shows about 1 in 10 loans being declined but I only do mortgages in NH, MA and ME so it's a small sample size for sure.   And furthermore,  some people who apply for loans are simply looking to be pre-approved for a potential purchase down the road and just want to know what steps they need to take so they are in an ideal position to be approved when the time comes.  

So on to the numbers.  If you want to read the full article please do so.

Condos:

While many of us were spending Valentine's day with loved ones,  FHA was busy at work notifying lenders that as of April 18th, 2011 they will be increasing their annual mortgage insurance premiums.    This will apply to mortgages with FHA case numbers assigned after that date.   A case number is typically assigned once a loan application is started.   So for you homebuyers out there,  this means you would need to have an application in with your lender before April 18th to avoid the fee increase.

So,  just how much is this increase to FHA mortgage insurance?   Before we discuss how much it will be,  it is important to make sure you understand how much it is.  Currently the annual mortgage insurance premium for a 30 year fixed rate FHA loan with the minimum 3.5% down is 90 basis points/year.   For example on a $250,000 loan the annual premium is $2,250 ($250,000 x .009).   To get the monthly payment just divide that number by 12 and you get $187/month.

After April 18th of this year the annual premium will be raised to 115 basis points (on 30 year fixed rate FHA loans with 3.5% down).   Let's use the same scenario as above to illustrate the difference.   On a $250,000 loan the annual premium will now be $2,875 ($250,000 x .0115).   The monthly breakdown of that comes out to $239. 

That is a difference of $52/month!

FHA is hoping that borrowers and lenders alike will take this increase with a spoon full of sugar.... it helps their medicine go down.   But it hasn't even been a full year since FHA nearly doubled their annual mortgage insurance premiums from 55 basis points up to the now 90 basis points borrowers must pay to obtain an FHA loan.    Their justification for the most recent hike is to bolster their already diminished capital reserves.   The Federal Housing Administration is required to keep a "rainy day fund" equal to 2% of their outstanding loan portfolio.    Over the past few years all the bad loans that were written have taken their levels down to about .5%.   So FHA anticipates that these new fee increases will help them get back on track.

I'm not sure if you noticed but it seems that as an industry we continue to get these fee increases that are said to be "ONLY another $50/month."   It is going to be interesting to see what impact this has on would-be homebuyers.   Here's is an example that you most likely won't see in most news publications.   Someone who was pre-qualified to borrow a maximum of $250,000 will now only qualify for a loan amount of $240,000.   After the new fees go into place the payments on the two loan sizes (rates being equal) will be roughly the same. 

Today's post is written by guest blogger Samantha Taylor.  For more information about Samantha please see her bio at the end of the post.

The purpose of loan modification is to help the distressed homeowners. A loan modification helps to reinstate loans, reduce the interest rate of the loan, reduce the balance on the existing loans, stop foreclosure proceedings, etc.

General qualification

Homeowners can qualify for a loan modification under the following circumstances.

* Financial hardship: Homeowner has to convince the mortgage lenders that he is going through financial hardship. He has to write a convincing hardship letter. It should contain a brief description of his hardship circumstances.

* Income: Homeowner has to document his income. He has to provide his pay checks, bank statements, award letters, tax returns, etc to the lender.

* Payment affordability: The homeowner has to prove that he can afford to pay the new modified loan. His debt ratio should be between 38% and 52%.

Obama loan modification guidelines

Obama home loan modification program is designed to help the homeowners avoid foreclosure. The homeowners can qualify for this program when they fulfill the following guidelines:

* Primary residence: The property has to be his primary residence. The lenders will verify the occupancy status through documents such as homeowner’s credit report.

* Financial hardship: The outstanding principal balance must be at least $729,750 for a single-unit property. The homeowners have to sign an affidavit of financial hardship and document their income.

* Time: Homeowners can qualify only when the loan has been originated before January 2009. The new modified payment will remain fixed for 5 years.

* Documents: Homeowners have to provide a financial statement, a signed 4506t form, paycheck, and a hardship letter to the lender.

* Trial period: If the homeowner qualifies for the loan modification, then he will be put on a 3 month trial period. The modification will be made permanent only when he makes the payments on time for at least 3 months and meets some document requirements. However, homeowners can qualify for HAFA short sale if they fail to complete trail period.

* Income: Homeowner’s monthly housing payment should be more than 31% of his gross monthly income. He has to prove that he has been unable to make mortgage payment due to a major change in his income.

It has been claimed that more than 1.1 million homeowners have applied for Obama home loan modification program till April 2010. Around 60,000 homeowners have shifted from trial status to permanent status in March 2010. Government has made the document requirements easier to understand in this year. Government has also specified that homeowner’s request has to be acknowledged within 10 days of application.

Samantha Taylor is the Community Mentor of MortgageFit and has been contributing her suggestions to the Community since 2005. Not just that, she has also made notable contributions through the various articles written on different subjects related to the mortgage industry. Few of her popular articles would include names like 'Mortgage that you can afford' , ' Mobile Home Loan with Bad Credit' , and ' How much mortgage can I borrow"?